Three Toronto-based entrepreneurs have launched a new startup crowdfunding  website, Giveffect, to raise money for charities by encouraging members of the millennial generation to donate.

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Toronto-based Giveffect is a crowfunding service publicly launched this week by co-founders (left to right) Allan Shin, Anisa Mirza and Kevin Shin. (Giveffect)

Giveffect, which made its official debut this week, is betting charities will be willing to hand over a cut of their donations in return for access to a managed online payment and tax receipting system —  and more importantly, access to a social network of donors in their teens and 20s.

"As fundraisers and as organizations, we are striving and should be striving for ways to interact and be more in tune with donors," said Anisa Mirza, the company's CEO, who co-founded the company with developers Allan Shin and Kevin Shin. "With Giveffect, we correct for that huge problem, which is the relationship building."

Giveffect targets the challenge of building relationships with an elusive generation that nevertheless donates $800 million each year to charity, said 26-year-old Mirza, citing a 2010 study by consulting firms Stratcom, hjc and Convio.

Facebook, Twitter integration

Of course, Giveffect is also counting on young donors being comfortable about seeing some of their charitable donations pocketed by for-profit companies. Mirza notes that in return, they get a platform that allows them to lead fundraising campaigns for causes they care about within online social networks such as Facebook and Twitter.

Mirza said Giveffect makes it easy to launch an online campaign for your favourite charity — for example, to celebrate your birthday — provided the charity has already signed up with the site and you want to raise money for one of their listed projects.

Giveffect lets users know when friends have made donations as a result of clicking on links from their Facebook or Twitter postings.

"We're able to track the ripple effect… the individual feels great, it helps us motivate people to give," said Mirza. She added that compared to older donors, Millennials tend to worry more about their donation having the greatest impact and are less concerned about the charity's overhead or administrative costs.

Charities get data about donors

Giveffect provides charities with demographic data about donors, as well as Facebook-like profiles that allows charities to contact them individually, if they don't choose to be anonymous. Mirza says unlike older donors, most millennials choose to share their information.

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The Giveffect site features Facebook-like profiles of both donors and charities.

Dozens of crowdfunding sites have popped up in recent years, funding projects ranging from consumer products to documentary films, by seeking small individual amounts of money from a large number of people, typically in return for a "reward" such as a copy of the product.

In the case of Giveffect, the average donation since its soft launch three months ago has been $20 to $25 and charities are required to report back to donors about what they did with the money in lieu of a reward.

Typically, crowdfunding sites take a cut of the money raised — 6.2 per cent in Giveffect's case, slightly higher than the 5 per cent charged by Vancouver-based Fundrazr and by Kickstarter, arguably the best-known crowdfunding service. PayPal, which processes the online payments, takes another 2.9 per cent of the donation plus 30 cents per transaction. That means close to 10 per cent of donations made through Giveffect go to for-profit companies. Meanwhile, CanadaHelps.org, a registered charity that helps other charities receive electronic payments but doesn't offer crowdsourcing, charges a 3.9 per cent transaction fee, or 4.9 per cent for charities that aren't registered for Electronic Funds Transfer.

Kickstarter does not fund charity projects, but other crowdfunding competitors, such as Indiegogo and Vancouver-based Fundrazr already do.

However, Mirza says because Giveffect specializes in fundraising for charities, it has several advantages. It provides charities with a connection to individual donors, rather than just the person who launched the fundraising campaign. And because it connects donors directly to charity rather than the person who launched the campaign, there is no risk that the campaign launcher will pocket the money instead of giving it to the charity.

100 charities enrolled

Since the company's soft launch three months ago, it has signed up about 100 registered charities in Canada, Mirza said, although only 22 were visible on the site Friday, including War Child, Big Brothers and Sisters of Kamloops & Region, Epilepsy Canada and Communities in Bloom. The rest still need to take part in an orientation. There are about 80,000 registered charities in Canada.

Mirza said she was inspired to start Giveffect after working in the non-profit sector and wanting to become involved in charities at a bigger level — something she felt young people rarely had a chance to do.

She initially wanted to start her own youth-friendly, social media-savvy non-profit organization. Then she realized that existing charities needed a way to engage with young people and to catch up with the digital age.

"We're going for that generation that has a mindset of looking for impact, looking for lasting solutions," she said. " They want to know what happened with their money, they want to be engaged with charities, they want to feel like they're leaders, they want to get others engaged, and they want a platform that is savvy, up-to-date with this digital era. And that's what we're providing."